January 2, 2025
What You Need to Know Today:
Here comes Santa Claus?
Trading was thin for Christmas weeK. So time for Santa to put in an appearance on Wall Street? The Standard & Poor’s 500 finished near session highs, up O.79% to 5974. And Nvidia (NVDA), up 3.69%, and Meta Platforms (META), up 2.49%, helped drive an index of the “Magnificent Seven” megacaps up almost 1.5%.
Is there a universe where shutting the government a week before Christmas is a good idea? And yetbthat’s what republicans seem determined to do
It’s now not just that the MAGA wing of the Republican majority in the House of Representatives along with President-elect Donald Trump and who-elected-you co-president wanna be Elon Musk have killed the Continuing Resolution (CR) negotiated with Democrats by Republican Speaker Mike Johnson. That bill would have kept the government’s doors open beyond Saturday’s funding deadline until March 14, 2025. There’s no way to put together a new package and pass it before funding for the government expires. These folks have also made it extremely likely that the shutdown will last for more than a few days. How?
House Republicans push government shutdown brinkmanship to the brink
Late Tuesday House Speaker Mike Johnson introduced legislation to prevent a government shutdown this weekend by extending federal funding until March 14, sending $110.4 billion to natural disaster survivors, and codifying a miscellany of policy changes. But Republicans are preparing to scrap Johnson’s plan to avert a government shutdown.
Fed signals fewer cuts, higher interest rates, higher inflation in 2025
In today’s quarterly update to its projections on economic growth, inflation, and interested rates in its Dot Plot survey of sentiment, Fed officials and governors forecast fewer rate cuts for next year than in their September projections, and they saw the fight against inflation making considerably less progress in 2025. According to the median estimate, they now see the benchmark interest rate reaching a range of 3.75% to 4% by the end of 2025. That would mean just two 25 basis-point cuts. The Fed’s projections are considerably more pessimistic than investors or Wall Street economists are. A majority of economists surveyed by Bloomberg had expected the median estimate would point to three cuts next year.
As expected, the Federal Reserve cuts interest rates by another 25 basis points
Today, December 18, the Federal Reserve lowered its benchmark interest rate for a third consecutive time.The Open Market Committee voted 11-1 to cut the federal funds rate to a range of 4.25%-4.5%. Cleveland Fed President Beth Hammack voted against the action, preferring to hold rates steady.
Please watch my new YouTube video: Hot Money Moves NOW! The dollar
Today’s Hot Money Moves NOW is U.S. Dollar. The dollar has been on a good run and is up 7% in the last three months, 2% in the last month. I expect this to continue with higher tariffs, and a Fed that will remain steady while other currencies are seeing more volatility. To get in on this you can buy an ETF like Invesco DB US Dollar Index (UUP), currently up 10.19% YTD with a 75 basis point expense ratio. Another option would be the WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU), up about 11% YTD with a 50 basis point expense ratio. WisdomTree buys Treasuries while Invesco uses futures but both are similarly sized ETFs and good ways to play the US dollar.
Special Report: Welcome to the new age of catastrophe capitalism–Part One, what capital markets will look like
Let’s talk today about the changes that global climate change is creating in our capital markets and on the very structure of current capitalism. Part One of this Special Report will look at the nature of the changes. Part Two, later this week, will look at specific implications for your portfolio. Hurricanes Helene and Milton are the perfect case study for the coming changes in capital markets and capitalism.
Live Market Report (20 minute delay)
Wall Street and the bond market see fewer interest rate cuts in 2025 from the Fed
Look out for more volatility in the bond market. BlackRock, JPMorgan Chase. and TCW Group have all warned that the bumpy ride is likely far from over. But also expect that the big overall trend for 2024 of rising bond prices and falling yields on hopes for aggressive interest rate cuts from the Federal Reserve is done.
Has inflation stopped slowing? Wednesday’s CPI will tell
With financial markets deeply conflicted about the effects of a Trump Administration’s policies on taxes, the deficit, mass deportations, and sky-high tariffs will have on the economy and interest rates the October Consumer Price Index (CPI) due Wednesday takes on added importance. Wall Street economists expect headline inflation rose 2.6% annually in October, an increase from the 2.4% rise in September. Core inflation, which strips out more volatile food and energy prices, is forecast to have climbed at a 3.3% rate year over year. That would be unchanged from September’s increase.
Saturday Night Quarterback say (on a Sunday), For the week ahead expect…
I expect more breathless speculation on who will fill the most important posts in the Trump Administration that will be sworn in on January 20, 2025. The consensus, which I agree with, is that this administration will be much different than the first Trump team with fewer figures with anything approaching old-style conservative Republican credentials. Thinkoif the contrast between second Trump administration vice-president J.D. Vance and first administration pick Mike Pence. That difference has made any meaningful handicapping of this race for power extremely difficult–even though the issue of who will fill what chair is incredibly important. For investors I think the most important pick to watch is Treasury Secretary.
Watch my new YouTube video: Rally to continue through December; but I’m worried about January
Today’s video is Rally to Continue Through December; I’m Worried About January. While I recorded this video on November 5 (before the election results), I still believed we were looking at a rally through the end of the year. Looking at the patterns of earnings and cash flow, and with the election complete, we’ll continue with this upward movement until January. Generally, rallies happen every December as money managers look to buy to “window dress” their portfolios at the end of the year. Now that the election is over, any pre-election hedges will turn into more cash entering the market in December. Fourth quarter earnings will likely be the best of the year but the problem is that 2025 will not see as much earning growth as 2024. Likely, in January, companies may issue negative guidance for the year ahead. I don’t expect a depression or recession, but I do think we’ll see a slow down/pull back and we’re certainly due for 5-10% correction. Continue to ride the wave through December, and then look to make some profits in January. Selling in the new year will also mean you don’t have to take the tax hit this year
Get ready for the Trump tax cuts–in the first 100 days of the new administration
President-elect Donald Trump and Republican Congressional leaders are already promising to push through a new round of tax cuts to replace the 2017 cuts that expire in 2025. New tax cuts, they say, will be the first legislative–as opposed to initiatives by executive order such as new Trump tariffs–priority after the new president is inaugurated on January 20 2025. With Republican assured of a 53 to 55 seat majority in the Senate and likely to retain a majority in the House of Representatives, there’s not much Democrats can do to stop the cuts from becoming law.
Hot Button Moves NOW: Watch for my solutions to the yield drought
Today’s Hot Button Moves NOW video is “Yield Drought.” CDs that used to pay 5.25% are now paying closer to 4.90% on the high end and Treasuries yields are also falling. As stock prices rise, dividend yields fall to. I think this yield drought will continue to get worse. You have to be opportunistic and BE ready for bouts of volatility. Keep an eye out for temporarily depressed stocks and buy those for the yields. I’ll be releasing a special report on dividends and yield drought next week. Keep an eye on your email or subscribe to get alerted when that report drops.
Fed sticks with a 25 basis point interest rate cut; but uncertainty seems to be a rising worry
The Federal Reserve lowered interest rates on Thursday by a quarter of a percentage point. The cut was the second this year, following on a larger than usual 50 basis point cut in September. The size of this cut was expected by the financial markets. Wall Street is expecting another 25 basis point cut at the central bank’s December 18 meeting. With the cut and its size so widely expected investors and traders were left trying to find policy hints in the Fed’s words. The pickings were rather slim.
Updated Special Report “11 Trump winners and 5 Harris/Trump losers”–first loser picks after Trump’s win
When I posted the previous version of this Special Report back on September 30, I wrote: “I don’t know which candidate will win the election. Right now the polls are within the margin of error on the national level–and even tighter in the seven battleground states that will likely decide the election. But I do know the results on November 5 will move stocks. Some right off the bat even before the results are certified. And more significantly as a new administration clarifies its policy views and takes office.” That has changed just a bit with last night’s victory by Donald Trump. We do know who won and will be the President come January 20. And we do know whose policies will move stocks and the financial markets in general. So let’s see if I can bring my picks and strategic advice up to date.
Watch my YouTube video: Quick Pick Fortinet
Today’s Quick Pick is Fortinet (FTNT). Fortinet is a cybersecurity company with a concentration in firewalls. They have about 15% of the firewall market. Firewall sales have a four or five year cycle as technology develops and companies need to upgrade their security. Morgan Stanley recently predicted the firewall replacement cycle is likely to begin in the second half of 2025. Fortinet is currently at a 20% discount to Palo Alto Networks, the leader in the cyber security stock sector. FTNT is profitable (GAAP and non-GAAP) with their non-GAAP earnings from the second quarter of 2024 showing 35% profitability. Morningstar predicts operating margins will grow to 38%-40% by 2028. I’ll be adding this to my Jubak Picks portfolio with an eye to 2025.
Will S&P 500 earnings continue to accelerate for the fourth quarter of 2024?
I continue to see this rally continuing through the fourth quarter of 2024vbefore faltering in the first quarter of 2025. That call does assume that we’ll get through today’s election and its aftermath with relatively little actual violence–protests in the streets from the losing side and lots of court cases, but no mass armed violence. And it assumes that projected earnings growth in the fourth quarter will live up to expectations and show the highest growth rate in all of 2024. No one knows what this post-election period will bring. So let’s move onto assumption #2: How likely is it that fourth quarter growth will hold up?
Pick #7 CNH Industrial for my Special Report “10 new stock ideas for an old rally”
Today I added CNH Industrial (CNH) as Pick #7 for my Special Report “10 new stock ideas for an old rally.” I also added the stock to my Jubak Picks Portfolio. Here’s what I wrote:
I like farm equipment maker CNH Industrial for the same reason I own Deere (DE) in my long-term 50 Stocks Portfolio. In the long term the world’s farmers are facing a huge challenge: produce more food as an increasingly chaotic climate makes growing stuff harder and harder. One important piece of the solution is a new generation of intelligent farm equipment that uses artificial intelligence to guide everything from when to plant to when to fertilize. At the moment, though, I like CNH more on price. CNH, the #2 farm equipment maker, is invitingly attractive because it is so cheap, absolutely and in comparison to Deere.
Pick #6 Fortinet for my Special Report “10 new stock ideas for an old rally”
Today I added Fortinet (FTNT) as Pick #6 for my Special Report “10 new stock ideas for an old rally.” I also added the stock to my Jubak Picks Portfolio. Here’s what I wrote:
There’s a long-term buying cycle in the firewall cyber security sector.
Saturday Night Quarterbacks says (on a Sunday), For the week ahead expect…
In normal times, the November 7 meeting of the Federal Reserve’s interest-rate setting body, the Open Market Committee would be the big event of the week. But these aren’t normal times in case you haven’t noticed. The country faces a stark choice on Tuesday and the polls show essentially a dead heat. And then add in fears that Donald Trump and/or his followers won’t accept the election results if he loses. Traders and portfolio managers have been adding hedges to protect against market volatility in the days around the election.
Nvidia to replace Intel in Dow Jones industrials Average–another catalyst for shares
AI chipmaker Nvidia (NVDA) will join the Dow Jones Industrial Average, replacing chipmaker Intel (INTC), S&P Dow Jones Indices, the owner of the 127-year-old index, said late Friday.
Economy added only 12,000 jobs in October–if we can trust the data
The U.S. economy added 12,000 jobs in October. The unemployment rate, which uses a different survey method, held steady at 4.1%. The Bureau of Labor Statistics revised the August and September reports to take a total of 112,000 jobs off earlier estimates. The average job growth over the past three months is now 104,000, down from 189,000 over the six months before that. The revised data and the October estimate are both more in line, in my opinion, with what is likely to have been happening in the economy as the result of high interest rates from the Federal Reserve. I thought hugh interest rates should have been slowing the economy more than the initial data suggested. And now it it looks like those high rates were working much more in line with past history of the economy. Of course, the big question today is should we believe the October report
Fed mission almost accomplished as PCE inflation dips to 2.1% rate
The Federal Reserve’s preferred measure of U.S. inflation, the Personal Consumption Expenditures (PCE) price index, fell to a 2.1% annual rate in September.
So far, the big issue with big tech earnings is valuation
From BIG Tech earnings results so far, what seems clear is that if a company smashes through expectations like Alphabet (GOOG) did, the stock will climb. If, however, you merely match expectations like Meta Platforms (META) and Microsoft (MSFT) then shares retreat.
Lithium Americas closes $2.3 billion DOE loan–stock climbs and then gives it all back
Yesterday, Lithium Americas (LCA) announced that it had closed a $2.26 billion loan from the U.S. Department of Energy’s Loan Programs Office under the Advanced Technology Vehicles Manufacturing Loan Program. The funding is earmarked for the construction of processing facilities at the Thacker Pass lithium project in Humboldt County, Nevada. Thacker Pass is currently North America’s largest known lithium resource. The stock jumped almost 5% yesterday on the news. It fell 8.87% today to $4.11 a share. Lithium Americas is a member of my Millennial Portfolio.
At 2.8%, GDP growth misses estimates but maintains strong trend for the economy
The U.S. economy grew at a 2.8% annualized rate in the third quarter, the Bureau of Economic Analysis reported today. The growth rate was down slightly from 3.0% in the second quarter. Economists had projected 3.1% growth. GDP has now climbed for 10 straight quarters.
No consumer slowdown visible as confidence numbers blast through projections
The Conference Board’s gauge of confidence jumped 9.5 points to 108.7, the highest level since the start of the year, data released Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 99.5. The month to month increase was the biggest since March 2021.
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